A country’s economic growth matters to stock market returns, not necessarily the current absolute level, but being able to accurately anticipate changes in growth going forward (which may not have been factored in by the market). The Centre for International Development (“CID”) at Harvard University, produces an Atlas of Economic Complexity based on the complexity of a country’s exports (relative to its income per capita level) to predict the country’s future growth prospects with more accuracy than other prevailing methods. They recently published their economic growth forecasts based on the latest global trade data which has some interesting results. To summarise:

-South Asia and East Africa are projected to have the highest growth rates (see table below) , while oil-driven economies are expected to experience the largest falls in growth. Emerging markets are expected to continue to outpace the developed world resulting in significant convergence in incomes, and India is likely to overtake China as a growth leader.

-India is expected to continue to widen its growth gap over China, growing at 7.9% versus a predicted growth rate of 4.6% for China – which stands below the 6% growth in 2020 projected by the IMF and the Chinese government.

-East African nations like Uganda, Kenya and Tanzania are expected to grow well over 6% , with countries like Philippines (5.5%), Turkey (5.3%), Pakistan (5.1%) and Indonesia (5.2%) putting in commendable growth performances.

-Europe and the U.S. show little optimism, with the U.S. likely to grow at 2.4% while European growth is expected to range from 2.3% for Italy to 3.7% for Spain.

-As countries develop their capacity to make both more products and products of higher complexity, they accumulate productive knowledge which in turns drives their economic growth. Countries like India, Kenya and the Philippines have made recent impressive gains in the complexity of their export product mix.

-The Atlas of Economic complexity is based on the recently released 2013 global trade data, and this ranking based on productive knowledge which goes into making products, is significantly more accurate in predicting future growth than other approaches based on governance, competitiveness and education.

-In addition to the growth rankings, they also publish the Economic Complexity Index (“ECI”) which ranks countries based on their average complexity of their export basket (the same indicator used for growth projections). African nations like Zambia, Malawi and Tunisia made the biggest improvements in ECI from 2003-2013, while Vietnam, Philippines and China come out on the top in Asia (see table below).

-The countries which slipped in the rankings the most were all commodity producing countries like Libya, Venezuela, Qatar and Australia. With the tripling of oil prices to $98 by the end 2013, the oil-based economies posted some of the fasted growth rates over the 2003-2013 period. However, the high growth rates were not sustainable as these economies did not diversify their export base into other more complex industries, and the sharp fall in oil prices since mid-2014 led to severe drops in growth projections, bringing them in line with the CID projections.

-The top rankings remain unchanged, with Japan, Switzerland and Germany maintaining the greatest diversity in productive knowledge. The U.S. slipped four places to 12th, with Korea showing the greatest rise amongst the leaders by moving up by 13 spots to fourth. Other top risers were Vietnam (up 24 spots to 66th) and China (up 14 spots to 21st).

-On comparison of a country’s ECI rankings to its income per capita over time, it becomes clear that growth prospects are best for countries which have developed the capabilities to produce more complex products than expected by their current level of income.

-An interesting approach to predicting growth prospects which has demonstrated higher accuracy than the traditional methods. Countries with the best growth prospects, relative to their current levels and taking into account what has been factored in by the stock market, does provide for a robust framework to make stock asset allocation decisions. The underperformance of EM stock markets versus the developed world, driven by overly pessimistic expectations of their growth potential, presents an attractive opportunity to overweight EM equities (and bonds) over the developed world.

-On the topic of the Next Crash? – an insightful comment from the research firm 13D:

-“Has a major bubble ever burst without central banks aggressively raising interest rates?The years 1929 (U.S. equities), 1968 (U.S. equities), 1979(commodities and inflation), 1989 (Japan), 1997-1999 (emerging Asia), 1999 (U.S.Internet and IT) and 2008 come to mind when secular-trend bubbles ended at atime when fundamentals appeared bright, but in reality, were already weakening asthey came to the end of their natural life. It is the nature of bubbles to haveparabolic blow-offs, which is what causes central banks to become afraid, and then, increasingly aggressive. (For what it’s worth, these major bubbles were all burst towards or at the end of the decade and all but two of them happened in the U.S.)”.

-In light of the above, it is interesting to note that well known bond manager Jeffrey Gundlach has made the observation that the period from 2018 would be critical due to the maturing of the Fed’s U.S. treasury holdings (about $1 trillion from 2016-2020), in addition to a large step-up in the repayment profile of junk bonds and loans (from a current level of under $50 BN to over $400BN by 2020 – see chart below). Unless the Fed then implements a new QE program to absorb the large increase in financing requirements to keep rates low, it could spell disaster for global asset markets. The political landscape in the U.S. (and the leadership at the Fed) will be an important determinant of the likelihood of a new QE program.

Why are cancer rates so low in India?:

Dr. Michael Greger, May 5th, 2015:

Related research underlined.

-It is estimated that many tumors start around the age of 20. However, detection of cancer is normally around the age of 50 or later. Thus, it takes cancer decades to incubate. Why does it take so long? Recent studies indicate that in any given type of cancer, hundreds of different genes must be modified to change a normal cell into a cancer cell. Although cancers are characterized by the dysregulation of cell signaling pathways at multiple steps, most current anticancer therapies involve the modulation of a single target. Chemotherapy has gotten incredibly specific, but the ineffectiveness, lack of safety, and high cost of these mono-targeted therapies has led to real disappointment, and drug companies are now trying to develop chemo drugs that take a multi-targeted approach.

-Many plant-based products, however, accomplish multi-targeting naturally and are inexpensive and safe compared to drugs. However, because drug companies are not usually able to secure intellectual property rights to plants, the development of plant-based anticancer therapies has not been prioritized. They may work (and work better for all we know), and they may be safer, or even fully risk free.

-If we were going to choose one plant-based product to start testing, we might choose curcumin, the pigment in the spice turmeric (the reason curry powder looks yellow). Before we start throwing money at research, we might want to ask some basic questions, like “Do populations that eat a lot of turmeric have lower cancer rates?” The incidence of cancer does appear to be significantly lower in regions where turmeric is heavily consumed. Population-based data indicate that some extremely common cancers in the Western world are much less prevalent in regions where turmeric is widely consumed in the diet.

-For example, “overall cancer rates are much lower in India than in western countries.” U.S. men get 23 times more prostate cancer than men in India. Americans get between 8 and 14 times the rate of melanoma, 10 to 11 times more colorectal cancer, 9 times more endometrial cancer, 7 to 17 times more lung cancer, 7 to 8 times more bladder cancer, 5 times more breast cancer, and 9 to 12 times more kidney cancer. This is not mere 5, 10, or 20 percent more, but 5, 10, or 20 times more. Hundreds of percent more breast cancer, thousands of percent more prostate cancer—differences even greater than some of those found in the China Study.

-The researchers in this study, “Because Indians account for one-sixth of the world’s population, and have some of the highest spice consumption in the world, epidemiological studies in this country have great potential for improving our understanding of the relationship between diet and cancer. The lower rates of cancer may, of course, not be due to higher spice intake. Several dietary factors may contribute to the low overall rate of cancer in India. Among them are a “relatively low intake of meat and a mostly plant-based diet, in addition to the high intake of spices.”

-Forty percent of Indians are vegetarians, and even the ones that do eat meat don’t eat a lot. And it’s not only what they don’t eat, but what they do. India is one of the largest producers and consumers of fresh fruits and vegetables, and Indians eat a lot of pulses (legumes), such as beans, chickpeas, and lentils. They also eat a wide variety of spices in addition to turmeric that constitute, by weight, the most antioxidant-packed class of foods in the world (see list below). It is also interesting to note that the traditional Ayurvedic fruit Amla (dried Indian gooseberry) used in the paste Chyavanprash used as a daily rejuvenation tonic (based on formulation from the Charak Samhita – the first compilation of Ayurvedic knowledge written more than 2,000 years ago) in many Indian households has 261 times the anti-oxidant content of blueberries (see video http://nutritionfacts.org/video/antioxidants-in-a-pinch/ ) !

-Population studies can’t prove a correlation between dietary turmeric and decreased cancer risk, but they can certainly inspire a bunch of research. So far, curcumin has been tested against a variety of human cancers, including colorectal cancer, pancreatic cancer, breast, prostate, multiple myeloma, lung cancer, and head and neck cancer, for both prevention and treatment.